Tangible assets refer to physical objects that have a measurable monetary value and are owned by an entity, typically a business. These include items such as land, buildings, vehicles, machinery, equipment, and inventory. Tangible assets are crucial because they often form the backbone of the operations of a business, supporting activities like production, storage, and sales. For example, a bakery's ovens and delivery trucks are tangible assets essential to its operations, contributing to revenue generation.
These assets are considered advantageous as they can be sold or leveraged to secure loans, providing financial support to the entity. Tangible assets are distinct from intangible assets, which include items like patents or trademarks, as they possess a physical presence. For businesses, the accurate recording, depreciation, and reporting of tangible assets in financial statements, such as the balance sheet, ensures compliance with accounting standards. For example, under current accounting standards, a company's computer equipment used in daily operations would be listed under tangible assets.